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Digital Economy

What and How to measure & Some takeaways from the EU policies. Former Research Fellow at the Directorate G rowth and Innovation Joint Research Center, European Commission (2013-2016) FEUI 1998 The views are my own. Digital Economy. The 10 th Research Day, FEB UI, 206

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Digital Economy

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  1. What and How to measure & Some takeaways from the EU policies Former Research Fellow at the Directorate Growth and Innovation Joint Research Center, European Commission (2013-2016) FEUI 1998 The views are my own Digital Economy The 10th Research Day, FEB UI, 206 Tuesday, November 1st, 2016 Ibrahim KholilulRohman

  2. Setting the scene • Digital economy • What and how to measure • Current landscape • Where are we? • Some policies

  3. Setting the scene • Digital economy • What and how • Current landscape • Where are we? • Some policies

  4. Setting the scene • The new paradigm of economic growth theory The future of economic growth depends on how a country raises the level of technological development where R&D and innovation play an important role. Attached with the GPT concept, the emergence ICT sectors best suit this paradigm. Scherer, F.M., (1999), “ New Perspective on Economic Growth and Technological Innovation”, Washington DC: Brooking Institute Press. Also : Romer (1990), Quah (1999) and countless other authors.

  5. Setting the scene:The future direction of economy The total GDP for 48 Sub-Saharan African countries in 1995-1996 was approximately USD 325 billion (1995) and USD 338 billion (1996), only 72% of the aggregate R&D and innovation driven value added consisting of the intellectual capital in General Electric, Microsoft and Shell.

  6. Setting the scene • Digital economy • What and how to measure • Current landscape • Where are we? • Some policies

  7. Digital economy • A transformation of the economy with the emergence of ICTs being used in every aspect of life. • Businesses activities adjust their supply and demand chains and their internal organization to fully exploit ICTresponsible for creative destruction through the birth of new firms and greater productivity in other sectors of the so-called General Purpose Technologies (GPT). • The diffusion of ICTs in almost all aspect in the daily life from common users perspective (OECD, 2009, p.13)

  8. Industrial revolution vs. ICT revolution Watt’s steam has contributed about 0.01-0.02 percentage points to the growth of labour productivity before 1830 and peaking at 0.4 percentage points in the period 1850-70. The impacts are much smaller than the basis of many recent studies measuring the effects of ICT on the growth of the economy (Pohjola, 2002). Why? General purpose technology (GPT) ; the pervasive use of technology in a wide range of sectors enabling generalized productivity gains transferred to the rest of the economy as a consequence of innovation in the technology sectors (Rosenberg, 1982).

  9. The emphasize is ICT, but how can ICT be defined? Computer and the Internet Burke (2009); Krizek and Johnson (2007); Verdegem and De Marez (2007); Grazzi and Vergara (2011); Salehi and salehi (2011); Spiezia (2011); De Vries and Koetter (2011) Software Howells (1995), Erumban and de Jong (2006); Gago and Rubalcaba (2007); Jalava and Pohjola (2008); Lucas (2008); Moshiri and Simpson (2011); Giuri, Torrisi and Zinovyeva (2008); Collard, Fève and Portier (2005); Van DerLaan, Van Oort and Communication equipment Corrocher, Malerba and Montobbio (2007); Antonelli, Krafft and Quatraro (2010); Tseng (2009) Telecom Gholami et al. (2006); Samoilenko and Osei-Bryson (2008); Hallikas, Varis, Sissonen and Virolainen (2008); Yu, Suojapelto, Hallikas and Tang (2008); Kushida (2012)) Intellectual property Corrocher, Malerba and Montobbio (2007); Antonelli, Krafft and Quatraro (2010); Tseng (2009)

  10. Alternative 1 : ICT ecosystem The producers and users of knowledge in the ICT Sector There are 4 groups of players who create and use knowledge. (1) networked element providers (2) network operators (3) platform, content & applications providers (4) final consumers [NOTE: The first 3 are intermediate consumers.] Best suit for industry analysis • Source : Martin Fransman (2008)

  11. Alternative 2 : ICT sectors Best suit for country level analysis (OECD, 2009)

  12. Setting the scene • Digital economy • What and how • Current landscape • Where are we? • Some policies

  13. Global perspective Source : PREDICT (Prospective Insights on R&D in ICT), European Commission De Panizza, De Prato, Rohman, Lopez, Rossetti (2016)

  14. Global perspective Labour Productivity Source : PREDICT (Prospective Insights on R&D in ICT) De Panizza, De Prato, Rohman, Lopez, Rossetti (2016)

  15. Industry perspective : the main players Source : Industrial scoreboard study, European Commission

  16. Digital economy : how big are they? Sales = 77 billion EUR = 60% total penerimaannegara R&D = 10 billion EUR = 1/3 total APBN pendidikan Sales = 10.3 billion EUR = 63% total expormigas Indonesia (2015) R&D = 2.2 billion EUR = 45% APBD DKI Sales = 1.5 billion EUR = 10% total expor palm oil R&D = 0.4 billion EUR = 25% total PDRB Bengkulu Source : EC R&D Scoreboard (Top 2500 R&D based firms worldwide)

  17. Nature of ICT industry • High R&D intensity • High inter-relatedness to other ICT industries at different layers • Global value chain • High degree of both technical and non-technical innovations • High orientation on export/international market • Very high marginal productivity of labor (especially in ICT services sector)

  18. BUTDigitization is not only about THINGS but also about HUMAN. More and more high value-added activities are linked to the production of ‘‘ideas’’ rather than ‘‘things’’ . Thus, unlike the manual worker who uses his/her hands to produce goods or services, the knowledge worker uses his/her head to produce ideas, knowledge and information. Drucker (1966, p. 3)

  19. Productivity gap • European Commission (2014, 2015): the rise of the productivity gap between EU and the US is attributable to the gaps in the ICT sector labour productivity. • The EC’s thus introduced the Grand coalition as an initiative to tackle the lack of digital skills in Europe to meet the demand ICT-related vacancies across all industry sectors. • A large digital talent pool ensuring labour force in Europe are equipped with adequate digital skills.

  20. ICT specialists • ICT specialists are workers who have the ability to develop, operate and maintain ICT systems, and for whom ICT constitute the main part of their job. • The ICT specialists’ data is calculated based on occupations following the International Standard Classification of Occupations (ISCO). • Mainly : sourced from Labour Force Survey (LFS) and Central Population Survey (CPS-US).

  21. ICT specialist (2015) Source : European Commission-Unofficial data (De Panizza, Rohman, Lopez (2016)

  22. Our position and the complexities..

  23. 1. The over-all size is rather small Source : European Commission’s PREDICT study (NACE 582, 61, 62, 631, 951), Indonesia’s data is taken from BPS The figures are not exactly comparable

  24. 2. Low R&D intensity in general… OECD (2010) Gross Expenditure on R&D (GERD)/GDP

  25. Asian companies among the top 2500 R&D intensive companies in the world 3. Industry is not doing R&D Source : IPTS-European Commission, Industry Scoreboard (2015). The top R&D intensive companies in Asia

  26. 4. The policy makers do not take it seriously the importance of R&D dataR&D data is even missing from the surveyThe data is only available in 2011

  27. 5. The performance up to 2011 was very weak Only 7.3% performs R&D (self-reported) 13.26% has innovation capabilities—quite contradictory Can you be …innovative without performing R&D?

  28. 6. ICT industry as the main lever for the digital economy is still out of context Just too few sample

  29. 7. ICT Diffusion side is …spurious In INDONESIA Indonesia is one of the most growing market however the country is lacking on how to make use of this emerging society to increase the competitiveness of the country

  30. Digital divide (BOP survey, LIRNEAsia and LPEM FEUI, 2012) Awareness and actual access. Do youawareof ”internet”? Do youuse the Internet/Areyou an internet user?

  31. 8. National broadband planning is rather …minimalistic El-Darwiche (2009)

  32. Systemic approach on the quality of broadband Source : Chalmers & Arthur D. Little Doubling speed affect 0.3% of growth rate (Rohman & Bohlin, Int. J. of Management and Network Economics, 2012 Vol.2, No.4, pp.336 – 356)

  33. Access, usage and the quality Proportion of urban vs. rural Access by devices Source : Statistics Indonesia (BPS)

  34. Indonesian broadband plan compared to other neighboring countries Small and long delayed Source : Gunaratne, Ilavarasan, Fernando and Rohman (2015)

  35. Setting the scene • Digital economy • What and how • Current landscape • Where are we? • Lesson learnt

  36. Learning from Europe Source : Stancik & Rohman (2014)

  37. LearningfromEurope : Digital Agenda forEurope (DAE) 100% 25% 10% 15% 10% 5% Cumulative growth rate 12% 1% 2007 2008 2009 2010 2011 2020 Year € 5.5 billion € 11 billionTarget Source: European Commission, Stancik(2012) & Stancik & Rohman (2014)

  38. Epilogue : what should we do? • More evidence based analysis • Data, Data and Data !! • Targeted R&D policies • Promoting more R&D companies (R&D patent box, etc) • Universities • Stronger triple helix • Parallel processes between a more conventional economic structural transformation and leap-frog policies –new paradigm (R&D and innovation) • Some left-over in the ICT diffusion side • Broadband and telecommunication regulation

  39. What and How to measure & Some takeaways from the EU policies Former Research Fellow at the Directorate Growth and Innovation Joint Research Center, European Commission (2013-2016) FEUI 1998 The views are my own Digital Economy The 10th Research Day, FEB UI, 206 Tuesday, November 1st, 2016 Ibrahim KholilulRohman

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